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SANITARYWARES

Booming market for hi-tech sanitary ware

ndia is a large, highly populated Country of around one billion people, with an economy, which is steadily

growing. As per the study, there were an estimated 125 million dwellings in India (1995), but 200 millionhouseholds. This reveals an acute housing shortage. The U.N. predicts an increase in the population of 1.6% per annum. There is a gradual migrant shift from rural to urban areas and 27% of the populationnow lives in urban areas as compared to 20% in 1971. There is a large difference in amenities betweenthe urban population and the rural. In 1994, 70% of the urban population had access to adequatesanitation, whereas in the rural community only 14% had access.

In 1991, approximately 64% of urban households had some kind of toilet facility compared with 9% of therural areas. There is a widening difference in income between different regions, the rich and the poor.

Sanitation is a must for every individual of our society. According to the Government estimates, more than50% of the urban population does not access to sanitation facilities. Condition of the rural areas abyssmalthat only 6% of the population are covered by sanitation.

Population Covered by Sanitation Facilities sa 1985 1990 1997

Rural 0.7 2.4 6.4 Urban 28.4 45.9 49.3

Sanitaryware demand :

Sanitaryware Industries in India for the last 6-7 years have shown very dramatic growth with major players doubling their production capacity. The Companies have also upgraded their manufacturingsystem by introducing Battery Casting, Beam Casting and have gone in for latest imported Fast FiringCycle Kiln Technology. These Companies have also upgraded their quality and have introduced high

value range in the market, which has been accepted and appreciated. The demand for high valueSanitaryware in India is growing very fast. The Companies are trying to meet the demand as therealization per Metric Ton for high value product is very good which ultimately results in good profitability.In order to educate the customers in India to go for quality products and also for higher valuesanitarywares, companies have adopted a very aggressive advertisement campaign. Companies havealso strengthened their dealer network by offering showroom incentives and some of the companies havealso gone for their own retail outlets in major towns. The demand for Sanitarywares in India is growing @15% -17% every year.

Sanitary ware made of state-of-the-art rare earth which caneffectively kill germs by means of cell decomposition has been

warmly received by mainland consumers. The rare earth usedcan also increase the density of anion in the air and thus freshen

the surrounding air in the bathroom. Such hi-tech products pointto a new trend in China's bathroom fixtures market.



The sanitaryware industry in India is divided in two sectors. The organized sector consisting of 5companies (M/s. Hindustan Sanitary Industries Limited, M/s. E.I.D. Parry, M/s. Swastik SanitarywaresLimited, M/s. Madhusudan Ceramics, M/s. Neycer India Limited), manufacturing sanitaryware for the last15-20 years and have established their Brand image. The organized sectors produce fully vitrifiedsanitarywares, using latest technology and best of Ceramic Raw Materials available in India. The

unorganized sectors have adopted local Indian technology to manufacture the basic sanitarywareproducts. Since the availability of raw material is in abundance and also very cheap in the state of Gujarat& Rajasthan, various companies have established their factory in these areas. They are producing thebasic sanitaryware in various brands. Unorganized sector's percentage of production capacity and alsotheir sales in the local domestic market are higher than that of the organized sectors' sales. Unorganizedsanitaryware manufacturer comes under small sectors and hence enjoy the benefit of Nil Excise Duty andSales Tax and hence they sell their products in the domestic market approximately 70% cheaper than theorganized sector products.

Government of India Policy on Housing Sector is very encouraging. The Government has announcedIncome Tax rebate on housing loan to boost the housing sector. All financial institutions are lendingmoney for construction of house at a very low rate of interest. Government figure shows that HousingSector is growing by approximately 25% every year. The need of Housing in India with 100 crores

population looks to be very potential. As per DGTD Survey Report there is a shortage of about 20 millionhouses in the country by the end of 8th Five Year Plan. The housing has become a basic necessity, aspeople in India are looking forward for improved sanitary condition. The concept of making toilet is fastgrowing even in village areas, where toilet till last two years did not exist.

The cost of producing sanitaryware in India is substantially low as compared to the advance countries,because the labour cost and the basic raw materials for manufacturing quality sanitarywares is availableat very cheap rate and in abundance. Because of our low cost of production, Indian sanitarywares arevery competitive in the neighboring countries and hence export from India is also growing everyday.

Demand Estimates :

The total demand for sanitaryware in India for the organized manufacturers is at present approximately

80,000 M.T. per annum. The region wise demand pattern can be estimated as follows: NORTH SOUTH EAST WEST TOTAL 18,000 32,000 15,000 15,000 80,000

Note: Every year the above demand is expected to grow by 15 to 17%.

Current Market Size:

The Indian Sanitaryware market is worth around 500 crores for the year 2001-02 with an annual marketsize of around 8 million pieces. This represents a yearly growth rate of about 3-4%.

Major players:

Until the mid 1940s the only Sanitaryware available in India was imported mainly from UK and was usedonly in upper class residences in major cities. The first Sanitaryware manufactured in India was by M/s.Parasuram Pottery Works. In the 1960s, companies like EID Parry, in collaboration with Royal Doulton of UK and Hindustan Sanitaryware in collaboration with Twyford of UK, started production of Vitreous ChinaSanitaryware. Other major players who joined the organized sector were Madhusudan Ceramics andNeyveli Ceramics. In the 1980s, 7-8 other players had entered the organized sector, but most of themhave since been taken over by the majors.



The large foreign players like American Standard, Toto, Villeroy and Boch have also set up distributionchannels in India.

In addition to the branded products made by the above companies, there are a large number of small-scale units mainly in Thangad and Morbi districts of Gujarat.

Concerns:

It has been observed that many sanitaryware manufacturers in the small-scale sector do not manufactureceramic sanitaryware to standard quality norms. Moreover some of these manufacturers use the word"Vitreous" along with their brand name whereas they do not meet the water absorption standards andthereby are misleading the consumers.

Outlook for Sanitaryware Industry in India:

In the next decade, India is expected to be one of the world's fastest growing countries for sanitarywareconsumption. The sanitation penetration has more than trebled from 8% in 1982 to 18% in 1994 and to

29% in 1999.

The comparative penetration levels in neighboring countries are as follows: Pakistan: 50%, Sri Lanka:65%, Malaysia: 94% and Thailand: 96%.

The government impetus to improve hygiene and sanitation is likely to increase the demand for sanitaryware in India. Moreover the increasing urbanization of India and the consequent requirement for residential and commercial buildings will be a major driver for growth of sanitaryware. Along with this thefocus of the central and state governments to provide housing facilities to the poor, is also expected togenerate demand.

The National Housing Policy formulation that envisages "Housing for all" by the end of Ninth Plan periodis a big step towards this. Indira Awaas Yojana, Samgra Awaas Yojana are programs for providing

housing to the rural poor is a key step taken by the government in this area. The housing developmentorganizations like HUDCO, State Housing Development Boards and Rajiv Gandhi Rural HousingCorporation Ltd. are also playing a large role in this initiative.

It is estimated that there is currently a demand for 20 million housing units in India. Further, a significantnumber of the 115 million housing units across the country will need reconstruction for improvement.Therefore a replacement market will emerge, though currently original equipment sanitaryware marketaccounts for nearly 90% of the market.

TopSANITARYWARE INDUSTRY STATISTICS:

1. World production: 187 Million pieces 2. India's Share: 6.7 Million pieces.

3. World ranking (in production): not in the Top 10 (India A/c for 3.30%)

4. Global Industry Growth Rate: 5-7% 5. Growth Rate (India Domestic Market): 10% 6. Organized sector:

% Share of Production: 43% No. of units: 6 Production Capacity: 103300 M.T. per annum



Actual Production: 95000 M.T. per annum

7. Unorganized sector: % Share of Production: 57%

Production Capacity: 136700 M.T. per annum

Actual Production: 120000 M.T. per annum